Edmunds Answers

Voted Best Answer

  • avatar morin2 01/05/12 8:01 pm PST

    You did the right thing by getting pre-approved with your credit union. But let's not put the cart before the horse.

    First, if the car is not a certified used car, you will need to have a pre-purchase inspection performed by a mechanic of your choice + a carfax to see if its really worth buying at any cost.

    Only after you have the mechanic's report and estimate will you be ready to even initiate negotiations. The price at this point is only an "asking" price - usually grossly inflated for those few poor lost souls who don't know how to buy a car and pay far more than it is worth. Completely ignore the asking price. Pretend it does not even exist and act shocked at the outrageous high price if is stated or shown on the car. If you are a poor negotiator, bring someone with you. I have done this many times for friends and have saved them many, many thousands - in one case close to 5 figures on a luxury brand. In return, I usually get dinner or a few dozen oysters, sometimes a case of wine. If you don't walk out on the negotiations at least once, you will have paid too much.

    Once you agree on a price after negotiations (plan on a whole day at least, or a weekend), only then bring up the issue of paying for the car. That is the only time this detail is relevant. Tell the dealer that you are pre-approved at X% (be honest) and give him a chance to beat that rate. You may be surprised. Dealers have multiple relationships with lenders and may beat your credit union rate. I bought 2 new vehicles in 2011 thinking that the dealer would not be able to beat my pre-approved rates of 3.45 and 3.35%. In both cases, the dealer beat the rates (3.24 and 3.25% for 3 years). Keep the term as short as possible to minimize the total amount of interest paid. On a new car, never exceed a term of 48 months (unless the rate is 0%); 36 or 24 months is even better. Remember that the total of all payments is really the out-of-pocket cost of the car, so keep that term as low as possible.

    The non-certified used car warranty can also be negotiated. When I have felt that I truly could not get the car for any less, I will consider asking them to double the warranty length. Once you have agreed to the price after a long negotiation, they will feel a moment of victory after dealing with such a worthy adversary. At that moment, it is fairly easy to get this "one last detail" in order to sign the purchase contract.

    Its really not that difficult. Remember there are plenty of used cars out there and I cannot emphasize enough that you should not be afraid to walk out in the middle of negotiations, even after you have paid for a mechanic's inspection. Your feet are wonderful negotiators and their fear that you will walk is to your advantage.


Answers

  • gmitch7 01/05/12 8:38 am PST

    The good news is that in an honest transaction either action would result in the same out come (your financed amount is the price of the car minus any amounts that you prepay towards the price of the car (down payment) ) Given the variance in honesty of the various dealers, the best thing for you to do is, get a letter of credit from your finance source (it will tell the dealer that they have qualified you to purchase a car up to a certain amount, and that they (your lender) will issue "bank" drafting instructions to pay for the car to the selling dealer upon your conformation of the details of proposed sale. You can then only deal with the financing company regarding the down payment. The dealer does not need nor have to have a down payment. Dealer might want some token amount ($100 or less) from you to as a show of good faith, so that he doesn't miss out on selling the car to someone else and then you don't actually by the car. Ask your lender how it should work. Dealer participation in opinion should be minimum! Their job is to sell you the car you want at the price you want, nothing else. They really don't need to know much about. BE ESPECIALLY CAREFUL IF YOU ARE A YOUNG PERSON, A ELDERLY PERSON, OR A PERSON OF COLOR. Do let the dealership push you to do anything that you don't want to do, including asking you to sign anything before you have made a decision. And PLEASE DONT SIGN ANY PAPER WITH BLANKS THAT THEY WILL FILL IN LATER. "First car purchase" can be overwhelming, remember you are the customer and they need you more than you need them. There are thousands of dealers out there, and there is no such thing as the "one perfect car" that you are looking at, when they made that one at the factory, they made thousands just like it. If the dealer doesn't have the car or the terms that you want move on to another (better) dealer. Good Luck!

    gm

  • knowledgepower 01/05/12 5:44 pm PST

    That statement is correct concerning down payment based upon credit but with you it doesn't matter with $5000 down and your own financing. The cornball answer he gave you was because you caught him off gaurd because most customers rely on dealers to get them approved and he probably never had to deal with that before. Whoever the lucky dealer is you choose to buy your vehicle from will receive the down payment in what ever form of payment is acceptable to them from you. Yes, they will want to steer you in the direction of financing with them and sometimes they can get you a better rate but it's difficult to beat a credit union rate but easy to beat another banks rate. Just hold your ground and insist on your own financing and they'll back off. Be ready for the leaving the open line of credit upsell, they will tell you by financing with them you can leave that line of credit open from your credit union for something else. I know because I've used it and sometimes customers say okay but other times they just brought me a check and the down payment check you write in the Finance Manager's office.

  • morin2 01/05/12 8:01 pm PST

    You did the right thing by getting pre-approved with your credit union. But let's not put the cart before the horse.

    First, if the car is not a certified used car, you will need to have a pre-purchase inspection performed by a mechanic of your choice + a carfax to see if its really worth buying at any cost.

    Only after you have the mechanic's report and estimate will you be ready to even initiate negotiations. The price at this point is only an "asking" price - usually grossly inflated for those few poor lost souls who don't know how to buy a car and pay far more than it is worth. Completely ignore the asking price. Pretend it does not even exist and act shocked at the outrageous high price if is stated or shown on the car. If you are a poor negotiator, bring someone with you. I have done this many times for friends and have saved them many, many thousands - in one case close to 5 figures on a luxury brand. In return, I usually get dinner or a few dozen oysters, sometimes a case of wine. If you don't walk out on the negotiations at least once, you will have paid too much.

    Once you agree on a price after negotiations (plan on a whole day at least, or a weekend), only then bring up the issue of paying for the car. That is the only time this detail is relevant. Tell the dealer that you are pre-approved at X% (be honest) and give him a chance to beat that rate. You may be surprised. Dealers have multiple relationships with lenders and may beat your credit union rate. I bought 2 new vehicles in 2011 thinking that the dealer would not be able to beat my pre-approved rates of 3.45 and 3.35%. In both cases, the dealer beat the rates (3.24 and 3.25% for 3 years). Keep the term as short as possible to minimize the total amount of interest paid. On a new car, never exceed a term of 48 months (unless the rate is 0%); 36 or 24 months is even better. Remember that the total of all payments is really the out-of-pocket cost of the car, so keep that term as low as possible.

    The non-certified used car warranty can also be negotiated. When I have felt that I truly could not get the car for any less, I will consider asking them to double the warranty length. Once you have agreed to the price after a long negotiation, they will feel a moment of victory after dealing with such a worthy adversary. At that moment, it is fairly easy to get this "one last detail" in order to sign the purchase contract.

    Its really not that difficult. Remember there are plenty of used cars out there and I cannot emphasize enough that you should not be afraid to walk out in the middle of negotiations, even after you have paid for a mechanic's inspection. Your feet are wonderful negotiators and their fear that you will walk is to your advantage.


ADVERTISEMENT

Top Car Financing Experts View More

Rank Leader Points
1. MrShift@Edmunds 1010
2. Stever@Edmunds 960
3. morin2 775
4. knowledgepower 705
5. karjunkie 320
6. isellhondas 295
7. boomchek 280
ADVERTISEMENT